Definition: Compensatory Damages


Compensatory damages fix the harm caused by someone else.

Compensatory damages fix the harm.

The word “damages” means that you’ve been harmed, and that you need to be repaid for those damages.

Compensatory damages are to help make you whole.

The idea is to restore you to how you were before the bad thing happened to you.  We can only use money in lawsuits

Let’s look at a few examples.

Let’s say we’ve been in a car wreck, and we’ve had to go to the hospital and have surgery.

The jury will decide how much money is enough to make you whole financially from your car wreck.

You have suffered:

  • Pain and suffering
  • Medical bills
  • Lost time from work
  • Perhaps permanent injuries/impairments

What is all that worth?  What amount of money (the only thing juries can award) will bring you back to the point you were at right before the wreck?

That’s compensatory damages.

Let’s say you’ve had to deal with false credit reporting, how do compensatory damages work?

These might be your damages:

  • Did you lose your job due to false credit reporting?
  • Did you lose your security clearance?
  • Miss out on refinancing your house and lowering your payments?
  • Get turned down for a loan to buy your dream house?
  • Have emotional distress dealing with the nightmare of false credit reporting?

Again the jury is trying to put a dollar figure on the amount that compensates you — that brings you back to “even” — as if the false credit reporting had never happened.

The jury can only give you money for compensation.  So that’s what they do in jury verdicts.

Some companies will claim that they’re being punished for having to pay compensatory damages, but that isn’t true.

If they were being punished, that would be punitive damages, which we talk about in another article.

Compensatory damages can sometimes be called “Actual Damages.”

Actual damages and compensatory damages are the same thing.

So no, compensatory damages are not to punish.  And never let a defendant act like fully compensating someone is punishment.  Nope — it is simply doing the right thing and fixing what they broke.

If you have any questions, you can reach us by phone at 1-205-879-2447.

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Have a great day!

-John G. Watts

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